M&S shareholders resist Chairman Rose

Big Investors at M&S are upset over Stuart Rose being given combined roles of chief executive and executive chairman. Shares have plummeted after the retailer revealed a drop in annual like-for-like sales. Rose anticipates two tough years ahead

In advance of the general meeting [Wednesday, July 9th 2008] City rumours pointed to two big investment funds (Schroders and Legal & General) as leading a shareholder rebellion.

Stuart Rose

As a corporate leader Rose ticks all the boxes. He came in to M&S as a white knight to protect the decline in the company’s fortunes, which had attracted unwelcome advances from the buccaneering Philip Green. In a few years he has justified the rejection of Green’s offer, with a turnaround in trading figures, and climb in share-price.

He was increasingly noted as a role model of a dynamic business leader. A recent award from The World Leadership Forum was based on a poll of chief executives of nearly a thousand British businesses. The clear winner was Stuart Rose.

Malcolm Turner, President of the World Leadership Forum said:

“We are delighted to announce that Stuart Rose is the winner of our Business Leader of the Year Award. He is plainly Britain’s most admired businessman, having dramatically improved Marks & Spencer’s fortunes while operating in a notoriously competitive and fickle market. We organised this award because we think that recent television programmes such as ‘The Apprentice’, or ‘Trouble at the Top’, bear little relation to the reality of corporate life. Worse still they often give young people, at the outset of their careers, an image of business which is inaccurate and damaging. We believe that highlighting the work of the best business leaders, and the best management practice, will pay dividends to the wider business world and give young people a less distorted view of commerce.”

Appointed Chief Executive in May 2004, Stuart Rose first joined Marks & Spencer in 1972. He moved to the Burton Group in 1989, becoming Chief Executive of the Multiples Division in 1994. He joined Argos plc in 1997 as Chief Executive to defend the takeover bid from GUS. He then became Chief Executive of Booker plc, which merged with Iceland plc in 2000. He joined Arcadia Group plc as Chief Executive and left in 2002 following its acquisition.

I’ve blogged on Rose a bit, but not in detail. In general he has avoided the leadership pitfalls that have been examined in Leaders we deserve.

Robert Peston neatly skewers British business leaders for avoiding the risks of exposure in tough media interviews. Stuart Rose has been an exception to the general point being made by Peston. He projects calm, thoughtfulness, and a capacity to hold on the practicalities of a story while retaining a sense of long-term corporate objectives.

But then things started turning nasty

In April [2008] Leaders we deserve reported on the decision by M&S to appoint Sir Stuart to the dual roles of CEO and Chairman. We picked up the possible problems of governance involved. The message released by outgoing Chairman Lord Burns suggested that the company was anticipating problems from its shareholders.

He was to be proved right

The reactions were largely negative, although comments suggested that the institutional shareholders might want to find some way of expressing displeasure that fell short of censoring Lord Burns or Stuart Rose.

What’s going on?

My question as the company faces pressure from its shareholders is: what’s going on?

We could assume that the institutional shareholders are motivated by concerns over corporate social responsibilities. If the customary city mindset still holds, that only seems likely where CRS aligns with self-interest.

In other words, the real goals of the shareholders are wrapped up in the rhetoric of CSR.

In which case, this another game of strategic chess.

‘We like you as a leader, Sir Stuart, but not if you weaken our influence over decisions you might make which might damage our investment value in M&S in the short as well as the long term’.

Rose gave a robust defence of M&S performance and prospets after reporting a record loss [May 2009]. He denied they had become a cut-price operation saying they offered both inexpensive and high-priced options to customers.